Here’s a secret the credit card companies would like to keep quiet: Among the most common fees they charge, there’s not a single one you can’t avoid.
The Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, helped make sure of that. Since the law’s 2009 inception, consumers no longer have to worry about “any time, any reason” interest-rate hikes and hair-trigger penalties.
“It is a much better environment for consumers now,” says Linda Sherry, director of national priorities for Consumer Action, a San Francisco-based advocacy group. “In fact, it’s leaps and bounds from where we were prior to the CARD Act.”
That’s not to say you can’t get tripped up by fees — or actually make a decision with full knowledge you’ll pay for it. Issuers still collect billions of dollars in fee income annually.
Here are 6 common fees, and how to maneuver your way around them.
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1. Late fees
The CARD Act did away with the worst of the late-payment abuses, but consumers still need to be proactive. Now, issuers can charge you $27 if you pay late, then increase that to $38 for additional late payments. Keep in mind that making a partial payment or failing to pay the minimum — even if only by pennies — is enough to trigger the fee.
Solution: Make your payment electronically before the bill is due. If you can’t remember, set up an automatic monthly payment that covers at least the minimum.
2. Annual fees
If finding the most lucrative credit card rewards program is your thing, you probably won’t be able to avoid an annual fee on your credit card. And the better the perks, the higher the fee. The Chase Sapphire Reserve card, for example, comes with a $300 annual credit for travel expenses, three points for every $1 spent on dining and travel and a big sign-up bonus.
But you’ll pay a $450 annual fee, as well.
Solution: Of course, it’s easy just to avoid an annual fee when looking for a new credit card by avoiding those cards that charge one. A July 2016 survey of 100 U.S. credit cards by CreditCards.com found that one-quarter charge an annual fee. Consider seeking out cards issued by smaller banks or credit unions as well.
3. Foreign transaction fees
It’s becoming easier to find cards that don’t charge a foreign transaction fee, typically a 3 percent surcharge added to each transaction in U.S. dollars you make abroad. The CreditCards.com study found more than 6 in 10 cards charge a fee, but 14 of the 100 cards surveyed dropped the fee since 2015.
Solution: To find out if a card charges this fee, consumers must look at the rate and fee disclosures from the card issuer or call customer service. Capital One is one major issuer that doesn’t charge these fees.
4. Balance transfer fee
The good news: You’ll only encounter this fee if you’re trying to consolidate credit card debt. Balance transfer fees are typically 3 percent of what you’re transferring or a minimum of $5 to $10, whichever is greater.
Solution: If your goal is to pay down high-interest credit card debt, paying the balance transfer fee may be a smart move, particularly if you can snag a lengthy interest-free period. You may end up paying less overall to finance your debt.
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5. Cash advance fee
Use your credit card to pull cash out of an ATM, you’ll pay for it. And continue paying for it. Almost all cards will charge you a fee for taking a cash advance, and you’ll typically pay a fee and an annual percentage rate above your standard interest rate. You also may forgo a grace period, meaning you’ll be charged interest from the moment you grab the cash.
Solution: Avoid doing this, if possible. Pull money out of your checking account or emergency savings first.
6. Over-limit fees
This fee has all-but-disappeared, as the CARD Act requires issuers to get customers’ permission to allow them to go over the limit — and then charge them for the privilege. Indications are this isn’t happening very often.
Solution: But if you’re coming close to bumping into your credit limit, you should consider either paying down your balance or asking for a credit increase. Know this, as well: Maxing out your credit card can have negative repercussions on your credit score. A full 30 percent of your FICO score is based on amounts owed, part of which comes from credit utilization, or how much of your available credit you’ve used.